Wal-Mart, Home Depot Lift Dow Even as Financials Lag

The Dow is back in rally mode as strong retail stocks outweigh drops in Wall Street banks.

The stock market was back in rally mode Wednesday morning as the Dow Jones Industrials (DJINDICES:^DJI) recovered all of their losses from Tuesday's session, rising 35 points as of 11 a.m. EST. Retailers Wal-Mart (NYSE:WMT) and Home Depot (NYSE:HD) produced the biggest gains to lift the Dow, even as continued sluggish performance from Goldman Sachs and JPMorgan Chase raised concerns about the financial sector's future contribution to the five-year bull market.

Interestingly, the nearly 2% gains for both Wal-Mart and Home Depot come in large part after even better performances by their respective rivals. Wal-Mart appeared to rise on the coattails of Target's (NYSE:TGT) impressive share price climb of almost 5%, as Target managed to perform better than expected despite having an ugly quarter marred by its high-profile data breach and higher costs from moving into the Canadian retail market. Even though fourth-quarter profit at Target fell 46% on a 5.3% drop in revenue, shareholders apparently were reassured that the news wasn't worse. Moreover, Target's comments about losing customers due to the data breach could help Wal-Mart if shoppers decide that its network is more secure.

Similarly, Home Depot was overshadowed by Lowe's (NYSE:LOW), which soared 5.7% after results that suggested the smaller home improvement company could be catching up with Home Depot. Quarterly revenue climbed 5.6% at Lowe's on a 3.9% jump in same-store sales, crushing Home Depot's 3% revenue decline. Lowe's also managed to avoid the full impact of promotional discounts, as profit jumped by 6.3%. Yet Home Depot shareholders clearly believe that the No. 1 home improvement retailer will see Lowe's results as a challenge, making it step up its gain yet again to capture more growth potential in what both companies hope will be a strong spring season.

Meanwhile, the Dow's Wall Street financial firms lost ground as Goldman, JPMorgan, and more than a dozen other banks had to deal with yet another regulatory settlement. This one came from the New York attorney general concerning the way they share information about their stock analysts' views with some higher-end clients. With allegations of an unfair playing field, the AG expects the firms to halt the practice. Yet a settlement would be just another reminder of the extensive liability that JPMorgan, Goldman, and the rest of Wall Street's finest will have to deal with well into the future, and that could rein in profits at a time when investors are trying to take maximum advantage of an aging bull market.

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Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.
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